The risk to the state-run Life Insurance Corporation of India (LIC) and State Bank of India from the Adani Group’s stock market plunge is limited, the top Finance Ministry official told NDTV on Friday, in one of the first government comments on the matter.
“If you are referring to one of the companies that is currently in news, we do not comment on the fortunes of individual companies. They rise and fall on their own strength and weakness. I will respond to SBI and LIC,” Finance Secretary TV Somanathan said in an exclusive interview.
“SBI and LIC’s exposure to any given company is far below the level where it should be a concern to any investor in the banks or in the insurance policies. It is tiny. The fate of one company will not affect any of these institutions significantly and therefore there is absolutely no cause for concern for either depositors or policyholders or investors in any of the nationalised banks or insurance companies,” he said.
The statement came as opposition parties stepped up their attack on the government, demanding a discussion in parliament and an investigation into allegations of fraud against the Adani Group that have triggered a bloodbath at the stock market.
LIC has invested more than $4 billion in the conglomerate whose combined market capitalisation has collapsed by more than $120 billion — about half of the group’s value — since US short-seller Hindenburg Research, which makes money by betting on shares falling, released the explosive report last week.
State Bank of India, the country’s largest financier, has given loans of as much as $2.6 billion to companies in the Adani conglomerate, or about half of what is allowed under rules, Bloomberg News reported, quoting an unnamed source. The bank has reached out to the company for clarification, Reuters reported.
Congress leader Jairam Ramesh on Friday said the opposition wants a probe by a parliamentary panel or a Supreme Court-appointed committee on the charges against the ports-to-energy business empire which counts the LIC and SBI among key investors.
“Only an independent investigation will save LIC, SBI and other institutions forced by the Prime Minister [Narendra Modi] to invest in the Adani Group,” he said.
On Monday, the LIC said it is reviewing the Adani group’s response to concerns raised by Hindenburg. The insurer holds a 4.23 per cent stake in the flagship Adani firm, while its other exposures include a 9.14 per cent stake in Adani Ports and 5.96 per cent in Adani Total Gas.
LIC said it had invested about 1 per cent of its assets under management in the Adani group. It added that Adani debt securities held by LIC were rated AA and above, which was in compliance with India’s investment regulations for life insurance companies.
The Adani Group has called the Hindenburg report a “malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts”.
On Sunday, the firm issued a 413-page statement that it said rebutted all of Hindenburg’s claims, calling it an attack on the “growth story and ambition of India”. Hindenburg said Adani’s statement failed to answer most of the questions raised in its report.
Shares in the group’s flagship firm Adani Enterprises were repeatedly suspended on the Bombay Stock Exchange on Friday, hitting multiple trading stops on the way to falling by 30 per cent before paring losses.
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